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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Natural Monopoly
Price Elasticity of Supply
Oligopoly
Surplus
2. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Spillover costs
Constrained Utility Maximization
Derived Demand
Least-Cost Rule
3. Entry of new firms shifts the cost curves for all firms upward
Profit Maximizing Resource Employment
Perfectly competitive long-run equilibrium
Utility Maximizing Rule
Increasing Cost Industry
4. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Marginal Cost (MC)
Determinants of Labor Demand
Total Welfare
Substitute Goods
5. A good for which higher income increases demand
Perfectly competitive long-run equilibrium
Normal Goods
Marginal Benefit (MB)
Determinants of Supply
6. Ed > 1 - meaning consumers are price sensitive
Constant Returns to Scale
Derived Demand
Utility Maximizing Rule
Price elastic demand
7. Models where firms agree to mutually improve their situation
Perfectly elastic
Income Effect
Collusive oligopoly
Surplus
8. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Marginal tax rate
Excise Tax
Positive externality
Substitution Effect
9. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Production function
Positive externality
Price inelastic demand
Spillover costs
10. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Profit Maximizing Resource Employment
Shortage
Cross-Price Elasticity of Demand
Average Total Cost (ATC)
11. The most desirable alternative given up as the result of a decision
Long Run
Opportunity Cost
Determinants of Labor Demand
Price floor
12. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Natural Monopoly
Price floor
Dead Weight Loss
Perfectly competitive long-run equilibrium
13. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly
Productive Efficiency
Economic Growth
Perfectly elastic
Four-firm concentration ratio
14. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Normal Profit
Positive externality
Determinants of Supply
Average Total Cost (ATC)
15. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Constrained Utility Maximization
Demand for Labor
Complementary Goods
Marginal Resource Cost (MRC)
16. The additional benefit received from the consumption of the next unit of a good or service
Utility Maximizing Rule
Price discrimination
Marginal Benefit (MB)
Price Elasticity of Supply
17. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Relative Prices
Least-Cost Rule
Cross-Price Elasticity of Demand
Perfectly elastic
18. The mechanism for combining production resources - with existing technology - into finished goods and services
Producer surplus
Production function
Price Ceiling
Unit elastic demand
19. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Marginal Product of Labor (MPL)
Average Variable Cost (AVC)
Non-collusive oligopoly
Negative externality
20. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Average Fixed Cost (AFC)
Determinants of elasticity
Marginal Resource Cost (MRC)
Income Effect
21. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Least-Cost Rule
Excess Capacity
Negative externality
22. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good
Public goods
Law of Increasing Costs
Break-even Point
Shutdown Point
23. A firm that has market power in the factor market (a wage-setter)
Marginal Analysis
Economic Profit
Complementary Goods
Monopsonist
24. Ed = 8 - infinite change in demand to price change
Profit Maximizing Rule
Derived Demand
Perfectly elastic
Increasing Cost Industry
25. When firms focus their resources on production of goods for which they have comparative advantage
Cross-Price Elasticity of Demand
Specialization
Inferior Goods
Monopolistic competition long-run equilibrium
26. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Collusive oligopoly
Total Fixed Costs (TFC)
Marginal Cost (MC)
Constant cost industry
27. Es = (%dQs) / (%dPrice)
Market Economy (Capitalism)
Total Product of Labor (TPL)
Monopsonist
Price Elasticity of Supply
28. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Constant Returns to Scale
Positive externality
Collusive oligopoly
Excess Capacity
29. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Price Ceiling
Income Effect
Decreasing Cost industry
Comparative Advantage
30. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Economic Growth
Perfect competition
Spillover costs
Monopoly
31. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Market Economy (Capitalism)
Economies of Scale
Total Product of Labor (TPL)
Constrained Utility Maximization
32. The rational decision maker chooses an action if MB = MC
Positive externality
Marginal Analysis
Surplus
Production function
33. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Substitution Effect
Total Product of Labor (TPL)
Market Economy (Capitalism)
Implicit costs
34. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Total Welfare
Surplus
Resources
Excise Tax
35. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Law of Increasing Costs
Total variable costs (TVC)
Explicit costs
Substitution Effect
36. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Spillover costs
Cartel
Normal Profit
Monopolistic competition
37. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Spillover benefits
Perfectly inelastic
Explicit costs
Profit Maximizing Rule
38. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Fixed inputs
Profit Maximizing Rule
Unit elastic demand
Allocative Efficiency
39. The additional cost incurred from the consumption of the next unit of a good or a service
Monopsonist
Marginal Cost (MC)
Surplus
Price Ceiling
40. Ed = (%dQd)/(%dP). Ignore negative sign
Fixed inputs
Price elasticity
Determinants of elasticity
Short run
41. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Law of Increasing Costs
Subsidy
Relative Prices
Constrained Utility Maximization
42. The price of a good measured in units of currency
Price Ceiling
Perfectly elastic
Absolute prices
Total Fixed Costs (TFC)
43. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Total Fixed Costs (TFC)
Marginal Analysis
Cartel
Monopoly
44. Total product divided by labor employed. APL = TPL/L
Monopoly
Average Product of Labor (APL)
Four-firm concentration ratio
Perfectly elastic
45. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Average Fixed Cost (AFC)
Profit Maximizing Resource Employment
Marginal Resource Cost (MRC)
Least-Cost Rule
46. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Price inelastic demand
Dead Weight Loss
Monopolistic competition long-run equilibrium
Spillover benefits
47. Ed < 1
Economies of Scale
Monopoly long-run equilibrium
Total Fixed Costs (TFC)
Price inelastic demand
48. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Market Economy (Capitalism)
Dead Weight Loss
Short run
Total Revenue Test
49. The total quantity - or total output of a good produced at each quantity of labor employed
Market power
Monopsonist
Absolute prices
Total Product of Labor (TPL)
50. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Normal Goods
Four-firm concentration ratio
Production function
Relative Prices